Monevator "Slow and Steady" Passive Portfolio

tigerspill

In another thread I was pointed at the Monevator article on a passive investment asset split (I am not yet allowd to post urls so have shown below

This showed an asset split -

[-] UK equity: 20%; HSBC FTSE All Share Index – TER 0.27%; Fund identifier: GB0000438233 [-] North American equity: 27.5%; HSBC American Index – TER 0.28%; Fund identifier: GB0000470418 [-] European equity ex UK: 12.5%; HSBC European Index – TER 0.37%; Fund identifier: GB0000469071 [-] Japanese equity: 5%; HSBC Japan Index – TER 0.28%; Fund identifier: GB0000150374 [-] Pacific equity ex Japan: 5%; HSBC Pacific Index – TER 0.37% Fund identifier: GB0000150713 [-] Emerging market equity: 10%; Legal & General Global Emerging Markets Index Fund – TER 0.99%; Fund identifier: GB00B4MBFN60 [-] UK gilts: 20%; L&G All Stocks Gilt Index Trust – TER 0.25%; Fund identifier: GB0002051406

Would this still be a good low risk 10+ year investment for investing 100K in today's world?
Are the funds they suggested then, still god for today?
I see a few classes missing - Property and Commodities. Would it be sensible to take maybe 10% from this portfolio to allocate 5% each to these additional asset classes? If so, what would be good funds?
USA exposure seems quite high - is this still sensible today?

Sorry for a lot of questions but I am just trying to learn for those more experienced.
PS. I have taken previous advice and bought Tim Hales Smart Investing. It should be with me early next week.

EdGasket

If I were investing 100K, I would want a spread of more than 5 funds and would include a property fund but maybe not commodities as we are in the wrong part of the cycle.

The TER on the Emerging Market equity is way too high. Instead have a look at iShares ETF Core Series and specifically EMIM for emerging markets; TER 0.25%

https://www.ishares.com/uk/individual/en/campaign/core-series/ishares-core-series-ind

iShares Core FTSE (CUKX) has TER of 0.07%. The charges will make a difference if you are in for the long haul. (Note: ETFs are bought like shares through a share dealing service)

I wouldn't be buying gilts or bonds right now with interest rates so low; their capital value will fall when interest rates rise.

North America is relatively expensive at the moment; why not buy a 'world' fund instead which will probably still be 50% USA.

Also instead of piling all in at one go, maybe invest 25K at 4 points during the year then you lessen the risk of a slump just after you invest all.

Good luck

guymo

First, those aren't the funds currently used in the monevator portfolio. Take a look at a recent update to see what they are using now, or better yet, work through the history to see how the fund choices have evolved.

http://monevator.com/the-slow-and-steady-passive-portfolio-update-q3-2014/

Second, you should be aware that this portfolio is not intended to be a recommendation or even to illustrate anything in particular other than what a passive portfolio can be like to run.

Finally, to address the main question of whether this selection is "good" and "low risk". It's certainly not low risk, being very equity heavy, but it is quite well diversified across geographies. Whether that makes it "good" for you will depend on your goals, needs and risk tolerance. I would recommend doing some research into asset allocation and thinking about goals first rather than worrying about what funds to use. Once you know what you're trying to do, you will have a lot of funds to choose from, but the broad asset allocation decisions are likely to be the most important ones.

Linton

tigerspill wrote: »

In another thread I was pointed at the Monevator article on a passive investment asset split (I am not yet allowd to post urls so have shown below

This showed an asset split -

• [-] UK equity: 20%; HSBC FTSE All Share Index – TER 0.27%; Fund identifier: GB0000438233
  [-] North American equity: 27.5%; HSBC American Index – TER 0.28%; Fund identifier: GB0000470418
  [-] European equity ex UK: 12.5%; HSBC European Index – TER 0.37%; Fund identifier: GB0000469071
  [-] Japanese equity: 5%; HSBC Japan Index – TER 0.28%; Fund identifier: GB0000150374
  [-] Pacific equity ex Japan: 5%; HSBC Pacific Index – TER 0.37% Fund identifier: GB0000150713
  [-] Emerging market equity: 10%; Legal & General Global Emerging Markets Index Fund – TER 0.99%; Fund identifier: GB00B4MBFN60
  [-] UK gilts: 20%; L&G All Stocks Gilt Index Trust – TER 0.25%; Fund identifier: GB0002051406

Would this still be a good low risk 10+ year investment for investing 100K in today's world?
Are the funds they suggested then, still god for today?
I see a few classes missing - Property and Commodities. Would it be sensible to take maybe 10% from this portfolio to allocate 5% each to these additional asset classes? If so, what would be good funds?
USA exposure seems quite high - is this still sensible today?

Sorry for a lot of questions but I am just trying to learn for those more experienced.
PS. I have taken previous advice and bought Tim Hales Smart Investing. It should be with me early next week.

1) In investing circles risk is taken to be related to volatility not to the chance of losing the lot. From this point of view it is a moderately high risk portfolio as it is 80% invested in equity ( shares). These days with a global economy all markets are liable to go up and down together, especially if you are predominantly investing in the largest companies in each market. An oil company with an HQ in Brazil is likely to move in a similar way to one in London. 6 years ago markets roughly halved, they could do so again affecting all your equity funds.

This isnt to say its a bad investment especially for the long term. However you must avoid panicking in the short term.

2) With the investment being in large index trackers the choice of funds is a fairly minor concern. There is little reason not to go for the cheapest you can find.

3) Property - in old investment books you will see Property recommended as a safe balancing asset. In those days Property meant a steady income from rents. These days Property is more about the capital value of city centre office blocks and shopping malls. These values go up and down with the general economy. So in my view Property is no longer a major requirement for investors. In any case the tracker funds will be investing in property companies.

4) Commodities - again I see no great need for you to consider commodities as commodity based companies will be included in the Index funds. They have been very volatile for some time and are currently unusually cheap and so if you were the risk seeking type of investor they look good for a long term punt. However if you were a risk seeking investor you wouldnt choose the Monevator portfolio.

5) Portfolio allocations
By investing in index funds you are following a belief that the market capitalisation provides a good basis for choosing investments. From that point of view the US allocation in the portfolio is rather low. The US market is around 40% of the global market.

kidmugsy

tigerspill wrote: »

[-] Emerging market equity: 10%; Legal & General Global Emerging Markets Index Fund – TER 0.99%; Fund identifier: GB00B4MBFN60 [-] UK gilts: 20%; L&G All Stocks Gilt Index Trust – TER 0.25%; Fund identifier: GB0002051406

....10+ year investment for investing 100K in today's world?

I'm not convinced by the case for a bond fund: why not just buy a (say) 15 year Gilt and hold it? That saves you the charge of (or exceeding) 0.25%.

Nor am I confident of an ETF for your Emerging Markets money. Passive investing is probably very sensible for big companies in developed markets. Your ETF would probably be biased to locally large companies in EMs. Is that what you want? I'm quite persuaded by the people who recommend investing in those large companies in developed markets whose income comes largely from EMs. Whether there's a passive way of doing that I don't know.

sthrax

A similar question but I was looking at the vangaurd lifestrategy funds. What is the advantage of picking the funds yourself rather than just investing in one lifestrategy fund?

If you're looking for a truly passive portfolio it seems that investing in just one diversified fund is the way forward? Or am i missing something?

guymo

sthrax wrote: »

A similar question but I was looking at the vangaurd lifestrategy funds. What is the advantage of picking the funds yourself rather than just investing in one lifestrategy fund?

If you're looking for a truly passive portfolio it seems that investing in just one diversified fund is the way forward? Or am i missing something?

If you want to set up an investment instruction and forget about it then yes, a single fund that manages asset allocation for you is a decent way to go. If you prefer to decide your own asset allocation a little bit then the kind of thing being illustrated on the monevator site can make sense. For instance, in the latest update, the monevator portfolio gets a fresh tilt towards small-cap companies and picks up some inflation-linked gilts.

http://monevator.com/the-slow-and-steady-passive-portfolio-update-q4-2014/

So this is not a "truly passive" set-it-and-forget-it portfolio. Actually it is not even a real portfolio; it's supposed to be instructive, which is the second reason for doing this by hand rather than through a single fund. Handling things yourself may be instructive and enjoyable for some.

ChopperST

Always found it strange that the S&S portfolio didn't hold property.

They have added the blackrock tracker to the portfolio which was one of my top performers last year, up 16%.

gadgetmind

I also have a decent allocation to property (and infrastructure) but the former can be a wild ride at times.

Kendall80

My exposure to property is more stable with the L&G feeder fund. Its a very small allocation at the moment though as part of the L&G multi 3.

AlwaysLearnin

Coincidently, the Q4 2014 update is out today, and property has now been added:

http://monevator.com/the-slow-and-steady-passive-portfolio-update-q4-2014/